Monday Morning Kickoff

So we are moving past the dog days of summer and after very little movement in any particular marketplace last week we expect things to heat up a bit in the coming weeks as political and fiscal issues begin to take the stage. Of course everyone probably notices that the Turkey “situation” has essentially disappeared from the news–as usual the media and thus investors are on to other interests. One of those interests is a potential trade deal with Mexico–and then Canada afterwards. We do not try to analyze such items as the amount of time required is way beyond our availability, but we certainly will watch for affects on equity and interest rate markets.

The DJIA traded in a range of about 25,600 to almost 25,900 before closing the week at around 25,800. The 10 year treasury barely moved during he week as it moved in a range of 2.81% to 2.85% closing the week at 2.83%.

As we quickly scan the economic news releases last week we see only a single stat that was stronger than ‘consensus’. Existing home sales and New homes sales both came in weaker than consensus and weaker than the previous month. The flash number for the Purchasing Managers Index for services and manufacturing both came in below the previous month. Durable Goods orders were very much weaker than last month, while only the Capital Goods orders was stronger than consensus and last month.

For the coming week we have Consumer Confidence being released on Tuesday and while this is unlikely to garner much attention any sizable shortfall to last month (127.4) could be meaningful as the consumer drives the economy and any failure in confidence could send consumer spending down hard. On Wednesday we get the 1st revision on the 2nd quarter GDP–one might think it will be important–but it isn’t since we have a 4.1% growth already announced these revisions are minor tweaks and no one will be paying much attention to the number. Thursday has personal income and personal spending–both unlikely to be meaningful–or at least paid attention to by most. Friday we have the Chicago Purchasing ManagerIndex and Consumer Sentiment–no one cares much what these indicators say as standalone numbers–but taken in conjunction we other indicators they certainly have meaning. With the weak numbers all around released last week if this continues we are going to see further flattening of the yield curve as the Fed moves to raise rates next month while the economically sensitive 10 year treasury will remain pegged in the 2.80’s% (or even lower).

The Fed balance sheet was totally flat last week following the drop of $30 billion runoff of the week before.

Last week we had just 1 new income issue announced and that was the Saratoga Investment (NYSE:SAR) 6.25% baby bonds due in 2025. The pricing term sheet can be found here.This new issue should begin trading today under the permanent ticker of SAF.

Last week we had the average $25 preferred stock move up by 4 cents while the number of available issues for $25 or less is at 158 issues–which is where it has pretty much been stuck for months. Obviously with the dog days of August and little movement in interest rates it makes sense that prices are very stable–certainly subject to change during the balance of the year.